Williams Sonoma 4Q15 Earnings Call Notes

Laura J. Alber CEO

Revolutionizing our approach to inventory

“Second, we are revolutionizing our approach to inventory. We have a significant opportunity to improve customer service and reduce cost by advancing our inventory management practices. In 2015, we experienced supply chain challenges related to the West Coast port disruptions that resulted in increased cost and lower service levels. As we worked through resolutions it became clear to us that we have an opportunity to reduce cost through more aggressive inventory management. Our goal is to lead the market in the delivery of furniture and home furnishing.”

Better forecasting and SKU rationalization should lead to sales growth in excess of inventory growth

“In 2016 we are planning inventory growth lower than our sales growth for the year, there are two key components to this plan. First, we have begun implementation of a new inventory optimization system that advances our SKU level demand forecasting and gives our teams more sophisticated tools to replenish our regionalizing distribution network and stores. And second, we are eliminating less productive SKUs which allows us to have better in stocks and improve order fulfillment. We see this as a significant opportunity and our entire team is aligned around this initiative.”

Also regionalizing supply chain

“In addition to inventory optimization we are further regionalizing our supply chain. We know that being closer to our customers is the key to faster and lower cost delivery. As part of these plans we are opening a new distribution center in Braselton, Georgia approximately 50 miles Northeast of Atlanta. ”

We prefer to be self critical regardless of the environment

“And the second part of your question about what is going on in the world and clearly there is a lot of external factors and many people have pointed to them and frankly we would prefer to be self critical. We’d rather look at every area of our company that we can improve so that we can outperform no matter what the environment is, hence the four areas of focus that I reviewed in my prepared remarks. ”

The promotional environment will not recede

“And also we believe the promotional environment will not recede and that no matter how you package a discount, a discount is a discount and so we continue to go through a systematic category review so that we can be sure that we are well positioned versus the competition and offer price on like items that we have superior quality.”

Julie P. Whalen

Slower growth this year as investing

“Sure and I think as we said in our prepared remarks we anticipate our 2016 earnings growth to be lower than our three year outlook because of the investments that I just highlighted particularly in our supply chain. And short-term though those offset the port “benefit” that may have been expected this year, longer term those are strategic initiatives for us.”

Getting e-commerce talent is increasingly competitive

“we are also investing in higher labor cost, which I think we can’t underestimate and we are not alone here. I don’t know if other retailers have talked about it but everybody is facing this. As the world is moving more to e-commerce, the getting distribution center talent, good talent is getting more and more competitive. So, that is a reality that all retailers are facing right now and so we are investing in that as well.”

Continue to see strong furniture growth

“I guess another way to maybe answer your question is that we continue to see very strong furniture growth. Where we saw weakness was in some of the gifting categories. West Elm is predominantly a furniture brand. And we have, our top customers are doing really well with us. We do look at the whole file and it’s really important to us that we have retention and that we have new customer growth as well. And we’re always focused on both all the way down the customer curve.”